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Research Summary: Research on necessity entrepreneurship has generated important insights, yet it views necessity entrepreneurs in developed countries as one encompassing group of unemployed individuals—ignoring that the level of need is not uniform but instead increases with time spent in unemployment. We begin to unpack the role of unemployment duration in necessity entrepreneurship by asking how it affects one of the most fundamental decisions in start-ups: "what business should I be in?" Analyzing primary data on 576 necessity entrepreneurs combined with three secondary data sets, we find that unemployment duration affects whether ventures are launched in "home" or in external industries, and moderates the extent to which founders' industry experience and the attractiveness of external opportunities relative to those in the "home" industry shape industry choice. Managerial Summary: Necessity entrepreneurs—individuals who create new firms because they have no other options for work—represent a substantial proportion of world-wide entrepreneurial activity, and, in developed countries, often come from the ranks of the unemployed. We analyze these entrepreneurs by answering the question "what business should I be in?," a fundamental strategic decision that founders make. Our findings reveal that duration in unemployment is a key, hitherto unexamined factor that systematically affects the industry-choice decision in startups. Moreover, we find that duration of unemployment moderates the founder's industry experience and the attractiveness of external opportunities relative to those in the "home" industry, with a markedly different picture for the long-term unemployed—suggesting the need for customized government policies for formerly unemployed entrepreneurs.

The choice of the firm's market environment is one of the fundamental decisions of firm founders. We study the pre-entry generation of founders' market choice sets by investigating their search for market opportunities in which the firm's technological resources, as embodied in a product or service, can be commercialized. Analyzing data collected through personal interviews with founders of 496 technology ventures, we find that founding teams with more diverse industry experience and more diverse external knowledge sourcing relationships identify not only a larger number of but, in particular, more varied (distant) market opportunities. However, the extent to which strategic variety of such opportunities is identified depends on the founders' technological expertise, whereas technological expertise is less relevant in identification of the number of opportunities. Furthermore, by showing that the extent and nature of the firm's pre-entry opportunity set has a significant effect on the likelihood of subsequent firm diversification, we document how initial constraints in founders' choice sets can have a lasting impact on the growth potential that the new firm exploits over time. We discuss the implications of our findings for the literatures on organizational learning and innovation, entrepreneurship, as well as the strategy literature examining firm growth, diversification, and value creation.

New firms are endowed with knowledge and experience at birth through the human capital of their founder(s). Existing empirical research suggests that this pre-entry knowledge and experience will influence the firm's chances of survival; however, the mechanisms underlying this relationship have yet to be investigated. We seek to better understand and unpack this relationship. Specifically, we study the extent to which a founder's pre-entry knowledge of the business activity and pre-entry management experience influence the effectiveness of two subsequent learning activities—namely, early-stage business planning and product-line change. Our findings suggest that pre-entry knowledge and management experience increase firm survival through moderating the effects of these subsequent learning activities. We also find that learning activities are not always beneficial; in our sample, early-stage business planning is associated with decreased firm survival, and product line change is associated with increased firm survival. We examine these patterns using survey data collected from 436 individuals in the Munich region who founded their own firms as an alternative to continued unemployment. Our results have theoretical implications for the entrepreneurship, evolutionary economics, and organizational learning literatures.

The EU and its leadership is often criticized as lacking a coherent long-term vision on Europe's future. Thus far, EU policy in the area of innovation and economic growth has been primarily framed as an effort to close the so-called innovation gap with USA, South-Korea, and other countries. In this discussion paper, a group of EuroTech Universities professors in the area of Innovation and Entrepreneurship address and highlight several key challenges in the transformation towards an inclusive and sustainable European economy. In the absence of along-term systemic perspective on Europe's challenges in the area of innovation and economic growth, we propose such a perspective here.